What do you do about workers’ comp coverage in Illinois and across the U.S. for “independent contractors” and consultants who work off-site or at their homes?
Editor’s comment: We were asked this question by one of Illinois’ top risk managers. We want to make sure all of our readers know our thoughts as veteran defense attorneys in this difficult state.
It is our assumption some or all of the work the independent contractor will provide will be a dominant part of the business relationship and the person won’t be doing work for numerous other organizations. In such an instance, it is our legal opinion, in reliance on numerous years of practice at the Illinois Commission; every wise risk manager should require the independent contractor to obtain a policy of workers’ compensation insurance for the work they are going to provide for your organization. We urge you not to rely on “independent contractor” status as the sole defense to a serious workers’ compensation claim.
In fact, to insure the coverage is in place, you may want to consider actively shopping for coverage and buying it for them and passing that cost along to them as a deduction from the contractual price. Either way, be sure to put the concept into the written agreement. That way, you can be certain the policy is initially in place, you will know when it is renewed and you will always be sure premiums are continuously paid.
It is our understanding such insurance is not wildly expensive, particularly for one worker. Check with your broker.
The primary concern in not being absolutely certain independent contractors have full workers’ compensation coverage is the scenario in which the independent contractor is found dead of a heart attack surrounded by papers or other products upon which he or she was working for you. By the way, if the man or woman died of a heart attack doing anything at home, it would be possible for the surviving spouse to bring/drag the person to the area where they would typically work to then make a claim for 25 years of tax-free workers’ compensation benefits. While we understand that may be considered unusual, the members of this firm have seen many strange things happen in our years of defense practice.
For example, we know of an “independent contractor” who fell down at home. He made the claim for a broken wrist asserting he was carrying a box of files. The gossip at the office was the claim was totally bogus and he just wanted to profit from a broken wrist, having fallen in a bathtub. We have no idea if there is any truth to any part of that story other than to confirm claimant did get a settlement for an injury occurring at home.
In our view, such claims are virtually impossible to dispute on the issue of accidental injury. All claims involving accidents for “independent contractors” will be similarly hard to investigate and dispute.
We also want to insure all of our readers clearly understand there is no document you or I could draft to insure an independent contractor who later becomes a workers’ compensation claimant will be fully responsible for their own injuries, particularly if the injuries are severe. All such documentation will be admissible as evidence and may or may not be considered controlling in this state.
The Arbitrators and Commissioners do not consider such documents a “lock” as a defense. They look at the totality of the circumstances and will consider the documents in the context of all other facts presented. We agree with that approach—if they didn’t do so, every gas station attendant, retail clerk and paralegal would be forced to sign “independent contractor” agreements as a condition of employ.
Therefore, you still have to prepare and defend the claim filed by an allegedly independent contractor—the Commission doesn’t allow summary motions on such issues to avoid lengthy litigation. We always tell clients to assume a scenario in which the “independent contractor” is severely injured and leaves a destitute spouse and seven starving children. Assume the impoverished children are all pictured on the local TV news and front page of numerous newspapers and websites. When interviewed, the reporters could easily point to the fact all work being done at the time of the catastrophic injury was solely for your company.
So, why won’t your big company help out this starving family? The pressure on your organization and eventually on its risk managers, as the “evil big company” to pick up workers’ compensation coverage could potentially be enormous and very uncomfortable. You would be much, much better suited to simply say, “we thought of that” and insure the family has fully-paid for WC coverage.
The overall concern is exposure. The minimum cost of a death claim in Illinois is over $600,000. The maximum cost of a death claim in Illinois is over $1.6 million dollars. We have one claim in our office right now in which a worker “bent over” in 1993 and allegedly injured her back. She is still being treated today in “pain management.” She has undergone numerous and sundry surgeries. Medical bills exceed $2 million dollars. We took over the file six months ago. The matter hasn’t yet been tried but exposure is clearly several million more dollars.
Even “minor” files can be problematic, as you well know. It costs nothing to file a claim at the IWCC—if the independent contractor develops carpal tunnel syndrome and is fired for poor performance, they could readily find an attorney who might be willing to file and make the claim for them. Despite our claim of independent contractor status, you would still have to fight the matter and set reserves and expend legal fees to fight. We would project needed reserves for such a claim to be $50-75K. That money could be tied up for several years, even if you hire solid defense counsel and win. All of such concerns are eliminated if our recommendations above are followed.
In summary, if you are concerned about such exposures, the best way to avoid risk is to insure all independent contractors have their own coverage or coverage you force upon them. In that setting, they are truly “independent.” Anyone who tells you different doesn’t understand the Illinois Commission and the strange twists and turns of major, high-exposure workers’ compensation claims.
If you need additional research or case law on this issue, let us know. We appreciate your thoughts and comments.
